2. What are blocks, there never explaind easy, as far as i know, they are like ''milestones' you randomly find when digging.
when you ''crack'' a block its worth alot. Is this correct?
Here is a basic description of what is happening. The details are a little simplified, but the concept is pretty accurate.
Bitcoin uses a public register of all transactions that have ever occurred.
Bitcoin refers to this ledger as the "blockchain".
When someone trys to send you some BTC, your client program can check this register to verify that the sender actually owns the coins.
But what is to keep the sender from sending coins that they own to you, and then going back to modify the blockchain.
They could erase the record of the transaction, and then send the same coins again to someone else.
That other person's client program wouldn't see the transaction in the blockchain since it was erased, and they would then receive the coins instead of you.
The coins would simply vanish from your wallet since the public register no longer shows that they were transferred to you.
This is why bitcoin has miners.
Miners gather up a bunch of recent transactions that haven't been officially locked into the register yet.
The miner adds a random number (called a nonce) to the list of recent transactions.
The miner passes all these transactions with the nonce through a mathematical function called a hash.
The hash quickly and easily creates a very big number (256 bits).
It is EXTREMELY unlikely that any other randomly chosen nonce would create the exact same hash.
The miner checks to see if the hash is a small enough number as determined by the "difficulty" which is set by the bitcoin protocol.
If the hash isn't small enough the miner increments the nonce and tries again, repeating until some miner somewhere successfully finds a low enough hash.
The difficulty is chosen in such a way to ensure that with the current processing power of all the miners together the probability is that a low enough hash will be found approximately every 10 minutes.
This means that many millions of hashes are computed before some miner somewhere is lucky enough to stumble across a hash that is low enough.
The miner then publishes the "block" of transactions along with the hash and the nonce to the blockchain.
Now all client programs can quickly and easily calculate the one hash using the published transactions and nonce to confirm that they have an official block in their register.
If someone were to try to erase a transaction from the blockchain, the hash would no longer be the same, so all clients would know that they could disregard the modified block.
To successfully erase a transaction, a thief would have to find a nonce with a block missing the transaction that would create a low enough hash to be accepted my the system.
This would either require a huge amount of time, or a huge amount of processing power, to do by himself.
Since new blocks are added on top of the old ones, the thief would have to either get this done in less than 10 minutes, or he would have to find a way to generate new hashes for every block that occurred in the meantime.
This implies that the thief needs to have more hashing power than the sum of all the hashing power in the entire bitcoin network, to successfully pull off this double spend attack.
Bitcoin creates an incentive for people to use up electricity and equipment to continuously generate these hashes to keep it difficult for an attack to overcome the system.
Every time someone somewhere successfully finds a low enough hash value for the next block of transactions, they are awarded 50 new BTC added to the register.
Pools take that 50 BTC and share it among all the miners in that pool that made an attempt to come of with a low enough hash for that block.
Pools with more people or more processing power are more likely to find a target hash and be awarded the 50 BTC, but they tend to have to split it among more people so each gets a smaller amount more frequently.
Pools with less people or less processing power have a smaller chance of being the first to find a target hash, so they don't get the 50 BTC as often, but when they do get it they may not have to split it among as many people.
